DETROIT-Despite facing a tenuous future from General Motors’ cost cutting measures as well as Kmart’s departure to the metropolitan Chicago area, the metro area’s office market continued to show signs of strength. According to the most recent report released by Grubb & Ellis, the market first turned bleak in January 2001 when the Motor City saw the depletion of its manufacturing sector.

During the three years of corporate downsizings and bankruptcies, more than five million sf of vacant space was added to the market causing the vacancy rate to skyrocket from 11.1% during the first quarter of 2001 to 20.6% by the fourth quarter of 2003. At the end of the second quarter of 2005, the office vacancy rate for the metro area stood at 20.9%, but the quarter marked the fifth time in six quarters that the region enjoyed a positive absorption of office space. Also, Grubb says, 667,167 sf of office space is under construction in the Detroit area.

The report says that trends over the past six quarters indicate a turnaround. “Spurred primarily by demand from the mortgage industry, as low-interest rates and the housing boom fueled the demand for financing, more than 560,308 sf of office space has been absorbed since January 2004,” the company said in the quarterly research report.

During the second quarter of 2005, Detroit’s eastern markets saw slight vacancy increases, while west side vacancy rates declined. Grubb & Ellis says though that while possible continued troubles at the Big Three automakers and Kmart’s departure hover over the Detroit region like a gray cloud, the future of the Ann Arbor-area office market could not look brighter. The search is on for Google as it looks for a presence in either Ann Arbor or Boston to house its new operations that will be the first of its kind to digitize the entire libraries of several universities including Harvard, Stanford, Oxford and University of Michigan. The average asking price for class A office space in the metro area is $26.01 per sf.

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